Graham v Entec Europe Ltd. (t/a Exploration Associates)

This is an appeal from the judgment dated 24 January 2003 of Her Honour Judge Alton sitting as a High Court Judge at Birmingham on a preliminary issue, whereby she held that the claim of the claimant against the defendant in respect of negligent advice as to the causes of and recommendations for remedial works in respect of subsidence at the bungalow, Offchurch, Leamington Spa, Worcestershire was time-barred pursuant to s.14A(4)(b) of the Limitation Act 1980 (“the 1980 Act”).

The remedial works were completed by August 1992. However further cracking in the structure of the bungalow became evident within a month thereafter, which later developed to the extent that further works of rectification were necessary, thus giving rise to these proceedings. Given the appearance of cracking in September 1992, the primary limitation period in respect of the claimant’s cause of action expired well before proceedings were commenced on 14 July 2000. The question before the judge was whether or not, for the purposes of section 14A of the 1980 Act, the claimant was possessed of the requisite knowledge as to his cause of action prior to 14 July 1997. The defendant asserted that the claimant knew or ought reasonably to have known of the cause of the damage shortly after it allegedly occurred in 1992/3. The claimant asserted that the requisite knowledge was not available until he was aware of the final conclusions of experts appointed to advise his insurers’ loss adjusters in September 1997.

The principal question raised by the appeal is whether a loss adjuster appointed by a claimant’s insurers in a subrogated claim can have knowledge attributable to the claimant for the purposes of section 14A. A subsidiary question arises as to whether that loss adjuster should be deemed himself to have knowledge at a point prior to delivery of the report of an expert appointed by him to investigate the cause of the loss to which the claim relates.

In 1991, following the development of cracks in his bungalow, the claimant claimed upon an insurance policy with his insurers, The (Royal) Sun Alliance (“the insurers”). Since the insurers would only finance remedial work designed to rectify actual damage and would not bear the cost of additional works designed to prevent the risk of future damage to parts of the property not currently affected, the claimant obtained advice from Chmeil Overton, structural engineers on his own behalf. Chmeil Overton reported their view that the cracking was attributable to a combination of shallow foundations together with clay shrinkage exacerbated by the proximity of at least one oak tree which suggested to them that either mini-piling or traditional underpinning might be required.

The insurers retained Mr Handford, a chartered surveyor and loss adjuster to investigate the damage on their behalf. In April 1991 he reported to them the substance of Chmeil Overton’s report.

The defendants, who are geotechnical engineers, were instructed. Between July 1991 and 6 August 1992 they made reports and gave advice supporting the installation of traditional underpinning to the foundations, which scheme was adopted by the claimant with the approval of the insurers, the claimant having decided not to finance the additional costs of installing underpinning to the property as a whole.

The remedial works were completed in August 1992. Within weeks, minor cracking appeared within that part of the property which had been underpinned. The claimant was initially advised that this might simply be ‘bedding down’ of the works; however monitoring was instituted under the supervision of Chmeil Overton. The monitoring confirmed that the property continued to be subject to subsidence movement in the area which had been underpinned and, by the end of summer 1995, it was clear that the cracking was significant and continuing.

Mr Handford was again instructed on behalf of the underwriters. He sought authority to investigate the suitability and adequacy of the works carried out, already being concerned that the works might not have been appropriate. He sought authority to appoint other structural engineers to investigate the further movement and to report upon the adequacy of the work carried out stating, in a letter to insurers dated 14 November 1995.

The insurers then authorised Mr Handford to instruct engineers and Mr Turner, of Robert Turner and Partners, a civil/structural engineer was appointed, his letter of retainer making clear that he was instructed to undertake whatever investigation was required to determine the cause of the further movement and whether the rectification works undertaken were structurally sufficient, particularly in view of the proximity of two of the mature oak trees.

After visiting the site Mr Turner sought the advice of Mr Finch, an arboriculturist to advise on the influence of the oak trees. In his letter of instruction dated 4 March 1996 Mr Turner informed Mr Finch:

On 4 June 1996 Mr Finch reported to Mr Turner, the report being copied to Mr Handford and the claimant.

In that report Mr Finch noted that, while extensive ground investigations and soil tests had been carried out by the defendants, their engineering report had made no reference to the likely effects of the adjacent trees and they had concluded that there was little evidence that the adjacent oaks were contributing to the movement. He noted that the underpinning depth recommended by the defendants for remedial works at the front of the property did not correspond with the guidance provided in NHBC Practice Note Number 3 (1985) Building Near Trees, which suggested that significantly greater foundation depths would be appropriate in the context of high water demand deciduous trees on medium shrinkability soil. He concluded:

Monitoring was instituted and maintained in accordance with Mr Finch’s recommendation. Meanwhile, in July 1996, Mr Turner appointed Mr Eaton, a geotechnical engineer, to attend on site and open trial holes to enable an independent view of ground conditions to be given. Mr Eaton investigated in August 1996 but did not submit a report until November. Meanwhile, Mr Handford reported direct to the claimant, stating that no conclusions had been reached at the site meeting and that bore holes were required. On 12 September 1996 he reported to the claimant:

Mr Eaton reported in November 1996 to Mr Finch the arboriculturist. The conclusion to his findings was as follows:

His recommendation as to necessary further works of rectification was that further underpinning be undertaken based upon piles. He said the scheme would be structurally complex and costly as a result, which in turn placed doubt on the long term viability of the existing dwelling.

Mr Finch did not copy Mr Eaton’s report to Mr Handford or submit a report of his own at that stage. However, the judge found that, Mr Handford having spoken to Mr Turner shortly after Mr Finch had sent his report to Mr Turner, he would have been told a summary of Mr Eaton’s findings.

Mr Turner did not submit a written report to the claimant or the insurers at this stage, as he was continuing to await monitoring results from Chmeil Overton. Having received these in February 1997, he forwarded them to Mr Finch with a request to submit his report as soon as possible. Mr Finch reported on 8 April 1997. While concurring with Mr Eaton as to the most likely cause of desiccation, he concluded that, though he had no specific evidence, he suspected that the building was suffering from seasonal movement superimposed on heave as a result of root severance during the underpinning works. He recommended that level monitoring was continued and past results reviewed and recalculated.

Following further monitoring, on 17 July 1997 Mr Finch again reported, saying that:

He concluded there was no available tree management solution to the problem and supported Mr Eaton’s proposal for sleeve piling.

Mr Turner finally reported to Mr Handford by letter dated 30 July 1997 which concluded:

Mr Handford reported back to the insurers. After further consideration it was decided that the cost of further piling work guaranteed to stabilise the building (if indeed a contractor could be found to guarantee the work) could not be justified and the claimant’s bungalow was “written off”. Accordingly when proceedings were eventually brought in July 2000 for the wasted costs of the original work of piling, they were brought by the insurers suing in the name of the claimant, the insurers having become subrogated to the claimant’s rights of recovery upon payment of his original claim under his policy.

Section 14A(5) provides:

Section 14A(6) provides:

For the purposes of this appeal we are not concerned with the “other facts mentioned in subsection (8)”. However, section 14(7) provides:

Finally, s.14A(10) provides:

On the basis of the facts found by the judge as already summarised, she held that the claimant did not personally have the relevant knowledge for the purposes of time starting to run until he was given a copy of the Turner report. She observed:

That finding is not challenged on this appeal.

The judge went on to find, however, that Mr Handford, as “an experienced loss adjuster with prior experience in the handling of subsidence claims” had the necessary knowledge well prior to July 1997, having been made aware of the contents of the report of Mr Eaton the geotechnical engineer in November 1996 (see paragraphs 14-16 above).

The judge stated:

Finally, the judge held that Mr Handford’s position as loss adjuster was that of an investigator appointed as agent of the insurers to investigate and progress the claim rather than himself being an expert whose help was sought and awaited in order to ascertain the facts upon which a claim might be based, and that, as such, Mr Handford’s knowledge was knowledge which was to be imputed to the claimant for the purposes of section 14A of the 1980 Act. She made that finding on the following grounds.

The judge stated:

Two grounds of appeal have been argued in this case. As originally drafted, the first ground asserted that the judge erred in law in finding that Mr Handford, the loss adjuster appointed by the claimant’s insurers was the plaintiff/claimant for the purposes of section 14A of the Limitation Act. However, as argued by Mr Sampson for the appellant, this resolved into a submission that Mr Handford was the agent of the insurers and not of the claimant and that therefore his knowledge could not be attributed to the claimant for the purposes of s.14A. Albeit the claimant relied upon the information acquired and reported on by Mr Handford as the de facto investigator of the claim, that was a matter of convenience only. Nor was Mr Handford, as opposed to the insurers, the person subrogated to the claimant’s claim. Nor, finally, was he a person in a position analogous to that of a solicitor to the claimant (c.f. Mirza v Birmingham Health Authority above), being in no contractual or other agency relationship with the claimant for the purpose of investigating the claim.

I accept as a matter of analysis that Mr Handford was not the agent of the claimant. He was the loss adjuster appointed by the insurers for the purpose of investigating the claim upon their behalf and, as such, his responsibility was to report to the insurers. It is true that, at one point in his evidence, Mr Handford spoke of his “primary function” as being “to deal with the claim and to assist the policy holder”. However he summed it up in this way:

In acknowledging that loss adjusters owe a duty of care to the policyholder when acting in the course of their retainer for the insurance company, Mr Handford was making a concession which was neither necessary to the issues nor, as yet, recognised by English law: c.f. the view of the New Zealand Court of Appeal in Mortenson v Laing [1992] 2NZ LR 282 and the discussion in Clarke: The Law of Insurance Contracts (3^rd ed) pp 842-845. However, that is by the way. If Mr Handford had reported to the claimant information sufficient to endow the claimant with the requisite knowledge to start time running, then the claimant would have been fixed with that knowledge; however, the judge held that Mr Handford did not do so and that finding is not the subject of appeal.

More pertinently however, upon my reading of the judgment, it appears that Mr Sampson’s fire is misdirected. Its seems clear that in paragraphs 39, 40 and 43 of the judgment quoted in paragraph 31 above, the judge was not attributing knowledge of Mr Handford to the claimant, but was treating it as the knowledge of the insurers and was going on to treat the insurers’ knowledge as being knowledge of the person ‘who in reality had the right and interest in pursuit of the claim’.

In the course of the appeal before us, Mr Sampson eventually conceded that, in relation to a subrogated claim, for the purposes of consideration of the date upon which the plaintiff acquires the relevant knowledge under s.14A so as to start time running for limitation purposes, the nominal plaintiff/claimant is fixed with the knowledge of the insurer for whose benefit the action is brought. In my view Mr Sampson was right so to concede. Like the judge, I consider that the spirit and purpose of the Act is to concentrate upon the knowledge of the person who has the right and interest in pursing the claim.

S.14A(5) treats the starting date for reckoning the period of limitation under subsection (4)(b) as the earliest date on which the plaintiff “or any person in whom the cause of action was vested before him” first had the requisite knowledge. That provision would appear to have particularly in mind the situation where a plaintiff sues as the assignee of another. However, it plainly contemplates that, at any given time, it is the knowledge of the person in whom the cause of action is vested which is relevant. The effect of the doctrine of subrogation in relation to contracts of indemnity by way of insurance is similar to that of an assignment of the assured’s rights of action against a tortfeasor. The doctrine confers upon the insurer, on payment of the loss, the right to receive the benefit of all rights and remedies of the assured against third parties which, if satisfied, will extinguish or diminish the ultimate loss sustained. Accordingly the insurer is entitled to exercise in the name of the assured whatever rights he possesses to seek compensation for the loss from third parties. One of the differences between subrogation and assignment is that an insurer exercising rights of subrogation against third parties must do so in the name of the insured. However, this does not detract from the fact that the subrogated rights of the insurer vest in him by operation of law upon the payment of the assured’s loss and, if an assured is uncooperative in this respect, the court will act to compel him to lend his name to proceedings brought by the insurer provided the insurer tenders an indemnity as to costs. In those circumstances, as it seems to me, it is plainly appropriate to construe the words “the plaintiff” in clause 14A(5) as meaning/extending to a plaintiff whether suing in his own name or the name of another by way of subrogation. That, as I understand it, is the construction favoured by the judge and it is one which I would adopt.

I would also hold that the knowledge of a loss adjuster investigating and advising on a claim on behalf of insurers for the purpose of pursuing a subrogated claim by those insurers, is to be treated as the knowledge of the insurers for the purposes of s.14A(5). In the course of argument, Mr Sampson acknowledged that it is the custom of many insurers to investigate claims through their own ‘in house’ loss adjusting department. He was unable to suggest any logical reason for distinguishing between the position of such an insurer, who plainly would be fixed with the knowledge of his employee, and the position of an insurer who, for purposes of economy or business efficiency, delegates the task to an independent loss adjuster such as Mr Handford.

Accordingly, I would reject the first ground of appeal.

The second ground of appeal is that the judge erred in law and fact in concluding that Mr Handford had obtained sufficient knowledge for the purposes of s.14A(10) when he was still awaiting a report from an expert consulting engineer whom he had instructed to report on the cause of the subsidence. As a general proposition, Mr Sampson submitted that a claimant (in this case the insurers suing by way of subrogation) who properly seeks the advice of an expert to establish grounds of claim against a defendant, he or they should not be fixed with knowledge prior to the delivery of that expert’s report. Mr Sampson relied in support of that proposition upon the observations of Purchas LJ in Nash v Eli Lilley & Co [1993] 4 All ER 395 at 396c-d when, in considering the almost identical provisions of section 14(3) of the 1980 Act, he stated:

He relies also upon various other observations in cases of personal injury in which the court has made clear that belief or suspicion is not sufficient to establish knowledge: see for instance Spargo v North Essex District Health Authority [1997] PIQR 235, 242 per Brooke LJ:

Mr Sampson submits that, given that it was reasonable for Mr Handford to seek expert advice, it follows that it was reasonable for him to wait for delivery of a final report from Mr Turner, rather than reporting back to the insurers with what he understood would be the effect of that report when received, but which had not yet been confirmed.

In my view there is no substance in this ground of appeal. So far as the general submission is concerned, it does not seem to me that any broad rule of thumb can be applied in cases of this kind. Nor does it seem to me that the observations of the court in relation to the state of knowledge of, or appropriate inferences to be drawn by, claimants in personal injury cases who lack experience of claims or dealing with experts, are of real assistance in relation to the position of an experienced loss adjuster investigating a case of the instant kind on behalf of an insurance company. Between paragraphs 51 and 56 of her judgment, the judge looked with care at the state of knowledge of Mr Handford based upon the series of experts’ reports which he received. I have already quoted her findings at paragraph 29 above. The judge, having studied the reports and heard the witnesses, made findings of fact which cannot be open to successful challenge on this appeal and which were plainly apt to imbue Mr Handford with the requisite knowledge well before the final report of Mr Turner was to hand by the end of July 1997. Even when those facts were confirmed in July 1997, for reasons which are obscure, the claimants nonetheless delayed for a period of some three years before issuing proceedings.

For the reasons set out above, I would dismiss this appeal.

I, too, would dismiss this appeal. I agree that, for the purposes of section 14A(5) of the 1980 Act, the relevant knowledge is the knowledge of the insurers; and that, in the circumstances of this case, the knowledge of the loss adjuster, Mr Handford, is to be treated as the knowledge of his principals, the insurers. I agree, also that the judge’s finding that Mr Handford had the requisite knowledge by November 1996 – after speaking to Mr Turner – was a finding of fact which she was entitled to make on the evidence. For my part I would treat that as a finding of actual knowledge: I do not think that section 14A(10) is engaged in this case.

I agree that the appeal should be dismissed for the reasons given by my Lord, Lord Justice Potter. I also agree with the additional observations of my Lord, Lord Justice Chadwick.